He Government He achieved what few expected two years ago: a budget surplus and some monetary order, with strong electoral and external support. But the “click” of expectations that activates consumption and investment It still doesn’t reach scale. The executive continues to find it difficult to irrefutably convince that this time is different.
One of the reasons was revealed this week when some Changes in the exchange rate regime. He BCRA confirmed that the exchange rate bands will remain in place in 2026, but that they will be adjusted monthly to the latest available inflation (t-2), without re-centering or realigning them, and launched a purchasing program of Reservations tied to the Remonetization: monetary base of 4.2% to 4.8% of GDP and an operational guide of up to 5% of the daily volume of the “free” foreign exchange market, with purchases in block if necessary.
It’s continuity with a little less ambiguity, but none Regime change. The most notable absence is that there is no news on the exchange rate and capital controls. The expectation of “next fix” that creates inertia does that financing and urges personal caution.
There are still doubts about the consistency and durability of the Exchange rate regime and the order of exit from stocks, households and companies maintain a more conservative stance that postpones Expenses and investments. It’s not irrational, it’s a current reminder: guidelines that are called “phases“Temporary measures do not convince the public that the time has come.
It is noticeable that a Government The company, which has not been at all gradual in formulating several of its policies, continues to rely on exchange rate/currency gradualism if last year’s experience is any indication opposite direction. The bands indexed by inflation and stocks are anomalies that show that the authorities have not lost their fear float freelywhich raises suspicions that they do not fully trust the soundness and coherence of their policies or that they intend to pursue specific objectives control on the relative price structure.
In the first case it is difficult to achieve this Private sector believes in a regime that the authorities themselves consider to be vulnerable. And if their motivation is to control the exchange rate and maintain a structure relative pricesWe know that if it continues, it will have deleterious consequences for the allocation of productive resources Economic activity and employment.
That the exchange rate of bands If there is an increase with the local inflation rate, the real forward exchange rate is generally retained. but by not recalibrating it, it does not correct the accumulated appreciation. If the external inflation If the situation recovers or the currencies of our key trading partners depreciate, the real appreciation could strengthen.
The reserve anchor rests on one Remonetization However, this may be slower if real growth slows or if political unrest reemerges. And the coordination with that remains to be seen Treasure: Will you buy dollars in the market that competes with the BCRA or will you allow it to prioritize reserve accumulation? Although these are technical nuances, they are very relevant to the risk premium and the interpretation of Program consistency.
In this sense, we do not share the view that country risk compression can be pursued as an “independent” objective of the EU Disinflation. The risk premium is to a large extent an assessment of the intertemporal coherence of the program: whether future inflation is uncertain, whether the indexation of the bands does not correct the cumulative increase in value if the final exit sequence from stocks is not clear and if the creation of reserves depends on a Remonetization Since financing costs are still fragile, they are unlikely to fall sustainably.
The approval of budget and the reforms submitted for legislative consideration by PEN are important contributions to completing the ongoing regime change. But that Macro consistency In the short term, she’s still the one in charge.
¿What can we expect by 2026?? Sectoral diversification will continue to shape the progress of economic activity as the world opens, deregulated and modernizes Labor market They are intended to serve as a guide for medium-term productive organization. The most lagging sectors (construction, trade and industry) will continue to drive the recovery of expectations and consumption particularly in large urban and suburban conglomerates.
In inflationary matterthe dilemma is familiar: accept a slightly higher inflation rate for a month or two, but have corrected or realigned the exchange rate; or continue with the bands, with relatively limited inflation but no correction real appreciation. The government has proactively chosen the latter. The first alternative seems to be limited to a scenario where changing the regime The exchange rate is reactive and forced by market dynamics, which are currently ignored by economic authorities.
Whatever the scenario, that inflation will not disappear in the second half of this year (the president should refrain from promises Zero inflationespecially when all empirical evidence suggests that not even in the Stabilizations it was more successful to reach this level and less in such a short time).
In summary, the new phase of Economic program It doesn’t seem to be enough for the “click” of expectations. This click is not based on magic, but rather because the program is no longer considered temporary: no bandswith an explicit exit from stocks and reforms that reduce Argentine costs. In this case the coverage premium is reduced credit becomes cheaper and recovery becomes more visible where perceptions arise. Until then: be careful.
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